But California's suspicions mostly were mocked in official Washington as examples of finger-pointing and conspiracy theories. The administration blamed the problem on excessive environmental regulation that discouraged the building of new power plants.
Again, Lay was influencing policy behind the scenes. An April 2001 memo from Lay to Cheney advised the administration to resist price caps.
"The administration should reject any attempt to re-regulate wholesale power markets by adopting price caps or returning to archaic methods of determining the cost-base of wholesale power," Lay said. [San Francisco Chronicle, Jan. 30, 2002]
Cheney and Bush echoed Lay's position in their political exchanges with Davis and other Democrats. On April 18, 2001, Cheney told the Los Angeles Times that the Bush administration opposed price caps because they would discourage investment. [L.A. Times, April 19, 2001]
In May 2001, Bush traveled to California on a trip choreographed like a President visiting a disaster area. Only this time, Bush wasn't promising federal help to a state in need. He was carrying the same message that Lay had sent to Cheney. In effect, Bush was saying: Read my lips. No price caps.
"Price caps do nothing to reduce demand, and they do nothing to increase supply," Bush said. [L.A. Times, May 30, 2001]
After weeks of standoff, as electricity prices stayed high and began spreading to other Western states, the political showdown ended on June 18, 2001. FERC approved limited price caps, a reversal prompted by Republican fears of a political backlash that could cost them seats in Congress. [L.A. Times, June 19, 2001]
Still, the administration's rear-guard defense of deregulation had bought Enron and other energy traders precious months to reap hundreds of millions of dollars in trading profits in California.
The imposition of FERC's limited price caps - and the state's aggressive conservation efforts - brought the energy crisis under control. That may have been good news for California, but not for Enron. By losing control over its ability to keep electricity prices artificially high, Enron faced new economic pressures.
"There are some hints of a connection [between the price caps and Enron's collapse], including the billions of dollars in cash that flowed in and out of Enron as the crisis waxed and waned," the New York Times reported later. [NYT, May 9, 2002]
With the easing of the California energy crisis, Enron's stock price began to decline, slipping from around $80 early in the year to the high-$40's. That began to put pressure on the stock hedges tucked inside the off-the-books partnerships.
The Dabhol Battle
In June 2001, the White House went to bat for Enron on another touchy issue, the natural gas power plant that Enron had built in Dabhol, India.
The plant had become something of a white elephant. Its cost of electricity was several times higher than what India was paying other providers, which led to an impasse over unpaid bills. Enron wanted India to pay $250 million for the electricity or buy out Enron's stake in the plant, worth about $2.3 billion.
These sorts of contract disputes between U.S. companies and foreign governments are normally handled by the Commerce Department or possibly the State Department. But Enron's Dabhol problem became a priority of Bush's National Security Council staff.
That level of interest over a contract dispute was almost unprecedented, according to former NSC officials from both Republican and Democratic administrations. The administration's intervention even involved direct appeals from top U.S. officials.
Again, Lay was influencing policy behind the scenes. An April 2001 memo from Lay to Cheney advised the administration to resist price caps.
"The administration should reject any attempt to re-regulate wholesale power markets by adopting price caps or returning to archaic methods of determining the cost-base of wholesale power," Lay said. [San Francisco Chronicle, Jan. 30, 2002]
Cheney and Bush echoed Lay's position in their political exchanges with Davis and other Democrats. On April 18, 2001, Cheney told the Los Angeles Times that the Bush administration opposed price caps because they would discourage investment. [L.A. Times, April 19, 2001]
"Price caps do nothing to reduce demand, and they do nothing to increase supply," Bush said. [L.A. Times, May 30, 2001]
After weeks of standoff, as electricity prices stayed high and began spreading to other Western states, the political showdown ended on June 18, 2001. FERC approved limited price caps, a reversal prompted by Republican fears of a political backlash that could cost them seats in Congress. [L.A. Times, June 19, 2001]
Still, the administration's rear-guard defense of deregulation had bought Enron and other energy traders precious months to reap hundreds of millions of dollars in trading profits in California.
The imposition of FERC's limited price caps - and the state's aggressive conservation efforts - brought the energy crisis under control. That may have been good news for California, but not for Enron. By losing control over its ability to keep electricity prices artificially high, Enron faced new economic pressures.
"There are some hints of a connection [between the price caps and Enron's collapse], including the billions of dollars in cash that flowed in and out of Enron as the crisis waxed and waned," the New York Times reported later. [NYT, May 9, 2002]
With the easing of the California energy crisis, Enron's stock price began to decline, slipping from around $80 early in the year to the high-$40's. That began to put pressure on the stock hedges tucked inside the off-the-books partnerships.
The Dabhol Battle
In June 2001, the White House went to bat for Enron on another touchy issue, the natural gas power plant that Enron had built in Dabhol, India.
The plant had become something of a white elephant. Its cost of electricity was several times higher than what India was paying other providers, which led to an impasse over unpaid bills. Enron wanted India to pay $250 million for the electricity or buy out Enron's stake in the plant, worth about $2.3 billion.
These sorts of contract disputes between U.S. companies and foreign governments are normally handled by the Commerce Department or possibly the State Department. But Enron's Dabhol problem became a priority of Bush's National Security Council staff.
That level of interest over a contract dispute was almost unprecedented, according to former NSC officials from both Republican and Democratic administrations. The administration's intervention even involved direct appeals from top U.S. officials.
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